The City watchdog has issued a warning to insurers to treat customers fairly after concerns that the cost of living squeeze may prompt households and businesses to cut back on insurance, leaving them without protection.
The Financial Conduct Authority has written to chief executives in the insurance industry urging them to ensure consumers are not sold unnecessary products or add-ons and do not face unfair penalties.
The watchdog is concerned the rising cost of everything from food to energy may force customers not to opt for insurance they would normally take out.
It said consumers may opt for cheaper insurance policies or forgo insurance entirely. Consumers going abroad may decide to travel uninsured and then face huge medical costs if they were injured or taken ill.
Businesses could also take a similar route as they try to cut overheads due to rising commodity and energy costs. The FCA said some small to medium-sized businesses may choose to cancel cybersecurity insurance policies “during a time when we believe the risks of hacking and cyber-attacks are higher” due to the pandemic and the “economic instability following Russia’s invasion of Ukraine”.
The FCA has asked insurers to reassess customers’ needs, provide clear information and waive fees associated with adjusting a customer’s policy.
Sheldon Mills, the executive director for consumers and competition at the FCA, said: “Customers who are struggling with their finances should contact their providers as soon as possible. We encourage customers to continue to shop around to find the best deal.
“Firms should not unfairly penalise them for any payment difficulties but instead work with them to find solutions.”
The move comes as the pressure on household incomes continues to rise. The communications regulator, Ofcom, said on Thursday a record 8m UK households were struggling to pay their mobile, broadband, pay-TV and streaming bills and the Next boss, Simon Wolfson, has warned of a second cost of living crisis in 2023.
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Earlier this year, the FCA told banks to improve their treatment of small businesses owners when recovering debts owing to concerns over the impact of the cost of living crisis.
It warned firms about unsuitable credit promotions and almost 4,000 adverts have been amended or withdrawn as a result.
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